Which of the following is a necessary condition for successful price discrimination?
A) The seller must possess market power.
B) The buyer must possess market power.
C) Transaction costs must be zero.
D) Buyers must have identical inelastic demands.

Question

Quizplus · Accepted Answer

Price discrimination can only be successfully implemented by a seller that possesses market power, as it allows the seller to charge different prices to different consumers based on their willingness to pay. Without market power, competition would limit the seller’s ability to charge different prices. The other options are not necessary for successful price discrimination – buyers do not need market power, transaction costs do not need to be zero, and demands do not need to be identical and inelastic, although the last point can make price discrimination easier to implement.

Which of the Following Is a Necessary Condition for Successful